DC. lawyer charged in multimillion-dollar insider trading scheme
By David S. Hilzenrath
Washington Post
April 6, 2011
By mid-March, as the government tells it, Matthew H. Kluger knew the FBI was closing in.
As a lawyer for three of the nation’s premier corporate law firms, most recently in the Washington office of Wilson Sonsini, he had allegedly stolen secrets that yielded tens of millions of dollars of insider trading profits. Now he was trying to eliminate the evidence.
Out went his computer, and his iPhone.
“Those are gone. I mean history,” he allegedly told a friend and co-conspirator.
But he was still worried.
“If they start looking at me and look at my bank records and all that other stuff . . . it could get ugly,” he said.
Sure enough. On Wednesday, the government dispatched any notion that law firms are always bastions of probity and discretion, charging that since the mid-1990s Kluger had tapped into his firms’ computer networks to extract and trade on confidential information about deals involving such blue-chip companies as Oracle, Intel and Hewlett-Packard.
Along with the financial crimes, he and a New York trader named Garrett D. Bauer are accused of engaging in a panicked cover-up that they discussed at length in telephone conversations with a third, unnamed conspirator, the alleged middleman.
In a March 17 phone call, according to a transcript of a recording, Kluger implored the middleman to get rid of a mobile phone that linked the two of them.
“I really would like to see this phone go bye-bye ASAP,” he said. “Do you want this to be our undoing?”
Worried that his fingerprints were on $175,000 in cash, Bauer allegedly urged the middleman to burn the money.
The middleman suggested that they launder the money instead — in a washing machine.
Kluger, 50, of Oakton, Va., and Bauer, 43, a New Yorker, were arrested Wednesday.
Kluger appeared in federal court in Alexandria and was being detained until a bail hearing Friday, said Rebekah Carmichael, a Justice Department spokeswoman. Bauer was being held in Newark.
An attorney for Bauer said it was too early to say how Bauer would respond to the charges. William J. Davis of Scheichet & Davis described him as “quite a pleasant fellow, very nice, quite gentle,” adding that Bauer “is in a bit of a difficult situation right now.”
Government officials were unable to identify an attorney for Kluger, and no one returned a message left at his home.
The two face criminal prosecution by the U.S. attorney for New Jersey and civil charges from the Securities and Exchange Commission.
A spokeswoman for Wilson Sonsini Goodrich & Rosati, the law firm where Kluger was until recently employed as a $290,000-a-year senior associate, said the firm was shocked to learn of the charges. The firm is giving its full support to the investigation, spokeswoman Courtney Dorman said in a statement.
The charges were the latest in a federal crackdown on insider trading that has nabbed hedge fund traders, management consultants, a former board member at Wall Street powerhouse Goldman Sachs and, recently, a Food and Drug Administration chemist accused of trading on advance knowledge of drug approvals.
The new case alleges that secrets were pilfered from the high priesthood of corporate law firms, including the New York-based firms Cravath Swaine & Moore and Skadden, Arps, Slate, Meagher & Flom...
Showing posts with label white-collar crime. Show all posts
Showing posts with label white-collar crime. Show all posts
Wednesday, April 6, 2011
Tuesday, August 24, 2010
He must have been doing something right: San Diego's Bill Lerach was a man who inspired fear and loathing in corporate boardrooms
Fear and Loathing in the Boardroom
Bill Lerach built a behemoth securities class-action law business
March 24, 2010.
By SETH HETTENA
San Diego's Bill Lerach was a man who inspired fear and loathing in corporate boardrooms across America. Lerach ran the West Coast operations of Milberg Weiss and was for many years the foremost class-action securities lawyer in America.
He extracted settlements in the millions, even tens of millions of dollars. That earned him powerful enemies. Congress tried to rein him in by overriding a presidential veto in 1995 to pass what became known as the "Get Lerach Act." But he went on to lead the biggest class-action lawsuit in history, the University of California's $7.2 billion judgment against Enron Corp.
In 2008, Lerach was sentenced to two years in federal prison after pleading guilty to conspiring to conceal kickbacks paid to plaintiffs. The 64-year-old Lerach spoke with us not long after he finished serving his prison sentence, part of which was spent in home confinement at his La Jolla mansion.
You cooperated with the authors of Circle of Greed, the book that chronicles your rise and fall. How fairly did the book portray you?
The book is tough on me. It's hard to write a book as long as that book is and not have some mistakes in it. I know and respect the authors very much and thought it was a very legitimate effort. Overall, I'm satisfied with it. Everyone wishes every book written about them portrayed them uniformly but I guess in my case that's not possible.
What's missing?
The book should have pointed out the work we did without expectation of compensation. We represented victims of the Holocaust in major, difficult lawsuits against major companies that cooperated with the Nazis. The book didn't talk about the work we did on behalf of workers, young women, brought to the Mariana Islands by Hong Kong businessmen and were exploited and had their civil rights and personal rights destroyed.
California's biggest law firms are in San Francisco or LA. What were the advantages or disadvantages of practicing in San Diego?
Other than getting out of bed a little early to fly to San Francisco and LA, I don't think there were any disadvantages and there were even some advantages. It's a great city, you're able to attract talent because people wanted to live here, and I found the defense bar, with a few exceptions, to be excellent. The local newspaper was horrid. So that was a disadvantage. It's the worst big city newspaper in America.
You've said that payments to plaintiffs that landed you in prison were standard practice among firms specializing in securities lawsuits. Why don't we see more prosecutions of securities lawyers?
I don't think we should have been prosecuted. I am only pointing out that as often the case, practices in an industry, whether they are good practices or bad practices, are industry practices. We would not have voluntarily shared our legal fees unless it was an absolute necessity to do so. We were in a competitive industry. Adam Smith's invisible hand is still at work. You don't give away money unless you have to.
You were a big Democratic supporter and you went after politically connected firms like Enron and Halliburton. Did politics play a role in your prosecution?
How can I say that? I wasn't the prosecutor and I wasn't sitting with Karl Rove. The facts are what the facts are and you've listed some of those facts. We were a terrible big sharp thorn in the accounting firms and investment banks that worship in the Republican temple. You make your own decision.
What's your take on what caused the financial crisis?
Don't focus on 2008. Go back and focus on 2000 where you had not as much of a systemically threatening crisis but you had a gigantic fraud by the dot-com companies. Trillions of dollars were lost by investors in financial markets. Then you had the most recent financial crisis.
These meltdowns are due to insufficient regulation of free-market capitalism. There is a lack of civil and criminal legal accountability on the part of powerful corporate and Wall Street actors who take the risks and engage in conduct that cause these ultimate meltdowns to occur. As night follows day, when the consequences for fraudulent behavior were reduced you got -- guess what -- more fraud...
Bill Lerach built a behemoth securities class-action law business
March 24, 2010.
By SETH HETTENA
San Diego's Bill Lerach was a man who inspired fear and loathing in corporate boardrooms across America. Lerach ran the West Coast operations of Milberg Weiss and was for many years the foremost class-action securities lawyer in America.
He extracted settlements in the millions, even tens of millions of dollars. That earned him powerful enemies. Congress tried to rein him in by overriding a presidential veto in 1995 to pass what became known as the "Get Lerach Act." But he went on to lead the biggest class-action lawsuit in history, the University of California's $7.2 billion judgment against Enron Corp.
In 2008, Lerach was sentenced to two years in federal prison after pleading guilty to conspiring to conceal kickbacks paid to plaintiffs. The 64-year-old Lerach spoke with us not long after he finished serving his prison sentence, part of which was spent in home confinement at his La Jolla mansion.
You cooperated with the authors of Circle of Greed, the book that chronicles your rise and fall. How fairly did the book portray you?
The book is tough on me. It's hard to write a book as long as that book is and not have some mistakes in it. I know and respect the authors very much and thought it was a very legitimate effort. Overall, I'm satisfied with it. Everyone wishes every book written about them portrayed them uniformly but I guess in my case that's not possible.
What's missing?
The book should have pointed out the work we did without expectation of compensation. We represented victims of the Holocaust in major, difficult lawsuits against major companies that cooperated with the Nazis. The book didn't talk about the work we did on behalf of workers, young women, brought to the Mariana Islands by Hong Kong businessmen and were exploited and had their civil rights and personal rights destroyed.
California's biggest law firms are in San Francisco or LA. What were the advantages or disadvantages of practicing in San Diego?
Other than getting out of bed a little early to fly to San Francisco and LA, I don't think there were any disadvantages and there were even some advantages. It's a great city, you're able to attract talent because people wanted to live here, and I found the defense bar, with a few exceptions, to be excellent. The local newspaper was horrid. So that was a disadvantage. It's the worst big city newspaper in America.
You've said that payments to plaintiffs that landed you in prison were standard practice among firms specializing in securities lawsuits. Why don't we see more prosecutions of securities lawyers?
I don't think we should have been prosecuted. I am only pointing out that as often the case, practices in an industry, whether they are good practices or bad practices, are industry practices. We would not have voluntarily shared our legal fees unless it was an absolute necessity to do so. We were in a competitive industry. Adam Smith's invisible hand is still at work. You don't give away money unless you have to.
You were a big Democratic supporter and you went after politically connected firms like Enron and Halliburton. Did politics play a role in your prosecution?
How can I say that? I wasn't the prosecutor and I wasn't sitting with Karl Rove. The facts are what the facts are and you've listed some of those facts. We were a terrible big sharp thorn in the accounting firms and investment banks that worship in the Republican temple. You make your own decision.
What's your take on what caused the financial crisis?
Don't focus on 2008. Go back and focus on 2000 where you had not as much of a systemically threatening crisis but you had a gigantic fraud by the dot-com companies. Trillions of dollars were lost by investors in financial markets. Then you had the most recent financial crisis.
These meltdowns are due to insufficient regulation of free-market capitalism. There is a lack of civil and criminal legal accountability on the part of powerful corporate and Wall Street actors who take the risks and engage in conduct that cause these ultimate meltdowns to occur. As night follows day, when the consequences for fraudulent behavior were reduced you got -- guess what -- more fraud...
Wednesday, December 3, 2008
With new US Attorney, it's a good time to be a white-collar criminal in San Diego
Voice of San Diego
Without Lam, U.S. Attorney's Office Takes Different Tack
By KELLY THORNTON
Dec. 2, 2008
..."There's been a precipitous decline in white-collar investigations and prosecutions over the last two years," said Michael Attanasio...
[Carole] Lam's tenure turned out to be glory days for the FBI's financial crime squads, for federal prosecutors working major frauds and for dream-team defense attorneys whose clients made headlines around the country.
When Karen Hewitt took over 22 months ago, controversy raged over what was perceived by some as politically motivated firings of Lam and seven other U.S. attorneys around the country...
Lam, a healthcare fraud specialist, had branded herself a champion of these high-impact corporate and public corruption cases. As for border crime, she bypassed the small players and went after leaders of large drug- and human-smuggling rings and corrupt border officials.
[Blogger's note: good call, Carole.]
...Criminal prosecutions in fiscal 2008, Hewitt's first full year in office, have increased 54 percent since Carol Lam's first year in office, fiscal 2003, according to the Transactional Records Access Clearinghouse, which monitors federal prosecution statistics. Comparing the same five-year period, immigration cases in the Southern District of California are up 88 percent.
[Blogger's note: The higher the prosecution rate, the more likely it is than innocent people are being charged. I'll bet the conviction rate has gone down for those who are brought to trial. I'll also bet that not many cases actually go to trial. If Hewitt charges everybody who gets scooped up by over-eager agents, then underpaid public defenders can't afford to defend them properly, and advise even their innocent clients to accept plea-bargains.]
Also during that span, prosecutions of white-collar cases referred by the San Diego FBI are down 74 percent, from 78 cases in 2003 to 18 cases in 2008, the lowest level in two decades. And public corruption cases are down 71 percent, from seven cases to two. Under Lam, the number of such cases had reached the highest levels in two decades, hitting 12 in 2004, TRAC found.
"She's very aware of the reasons her predecessor was axed," criminal defense attorney Bob Rose said of Hewitt. "I really doubt she would like that to happen to her."
...until a few weeks ago, the major frauds unit was at its lowest staffing levels in years -- a decline that began toward the end of Lam's 4.5-year tenure as resources dwindled. Four junior attorneys were assigned to the unit recently, bringing the number to about 11, lawyers in the office said. That appears to be in step with a national trend to crackdown on mortgage fraud and other financial crimes associated with the nation's economic meltdown.
Hewitt's office declined to provide statistics or answer questions, but said from 2007 to 2008, immigration cases were up 48 percent, gun cases were up 17 percent, child pornography cases were up 60 percent, and frauds were up 71 percent. Hewitt was interim U.S. attorney for eight months of fiscal 2007...
Former FBI chief Bill Gore, now the undersheriff, raved about Hewitt while introducing her as speaker at a Rotary Club meeting in October, calling her a "team player."
...the vast majority of cases prosecuted by Hewitt's troops comes from Customs and Border Protection (73 percent) and Immigration and Customs Enforcement (17 percent), both part of the Department of Homeland Security. Only about 2 percent of the U.S. attorney's cases are referrals for prosecution by the San Diego FBI, according to TRAC, which analyzes Justice Department data...
The federal government reported filing 151 criminal mortgage fraud prosecutions in the first 10 months of FY 2008, 10 of which are in the Southern District of California, which includes San Diego and Imperial counties, according to data obtained by TRAC.
The 151 federal mortgage fraud prosecutions so far reported for fiscal 2008 were clustered in only 10 judicial districts, with Florida South (Miami) the most active with 69 cases, followed by Western Pennsylvania (Pittsburgh) with 26 prosecutions. San Diego was tied for third with 10, sharing that distinction with Northern Georgia.
In its analysis of the data, the TRAC report said: "Given the broad troubles now confronting the economy of the United States, and the role that mortgage fraud may have played in these problems, the relatively small number of cases in this area is somewhat surprising. For example, during the same period U.S. attorney offices criminally prosecuted 554 individuals for simple drug possession, 399 cases for environmental wildlife protection and 405 for child pornography."
...Hewitt, a Republican and avid sports fan, joined the San Diego U.S. Attorney's Office in 2000 and prosecuted civil fraud cases before Lam appointed her as third in command -- executive assistant U.S. attorney -- in 2006...
With the election of Democrat Barack Obama to the White House, Hewitt almost certainly will be stepping down, and priorities are likely to shift again with the unnamed new appointee. The position is a political appointment, and incoming presidents typically choose their own U.S. attorneys. But that process could take up to a year.
[Blogger's note: Unfortunately, Democrats often let big fish get away, just like Republicans. I would like to see the appointment of Eliot Spitzer or someone with equal courage to go after the criminals in insurance companies. And I'd like to see the US Dept of Justice do something more important than going after prostitutes.]
Hewitt apparently prefers to put little guys in jail, burdening the taxpayers and contributing the United States reputation as having the highest percentage of incarcerated population in the world. It's not hard to get someone to plead guilty when their exhausted lawyer doesn't have time to work on the case. You end up with lots of guilty pleas, often from innocent people who fear more years in jail if they don't plead guilty.]
...the additional cases under Hewitt have had a significant impact on workload for the U.S. District Court, the clerk's office, court-appointed defense lawyers and the jails and prisons.
Federal Defenders of San Diego Inc. has been forced to increase the number of staff lawyers by 25 percent in the last year to handle the caseload. "There've been points in the year when everybody's been just absolutely under water," said Reuben C. Cahn, executive director. "Everyone can work 80 hours a week for a couple months at a time but they just can't do it longer than that without the quality of work eroding or without burning out. It's been a very difficult year for us."
Cahn said the numbers tell the story. His office handled 892 immigration cases in FY 2006, then 1,240 in 2007 when Hewitt first took over, and 1,660 in 2008. "That's essentially doubled in two years," he said.
So, the prominent white-collar defense lawyers are doing a lot of civil cases now. There have been no new high-profile corruption cases like Cunningham, who is serving more than eight years in prison.
An Office of the Inspector General report has concluded that Lam's firing, while mishandled, did not appear to be an effort by the Bush Administration to derail Lam's pursuit of Cunningham and spinoff cases targeting GOP colleagues. Her firing was about failing to prosecute border crimes, a Justice Department priority, the report said...
[Blogger's note: There's obviously no need for meddling. The Bush Administration hired Hewitt because they were confident she would do exactly what they wanted.]
Without Lam, U.S. Attorney's Office Takes Different Tack
By KELLY THORNTON
Dec. 2, 2008
..."There's been a precipitous decline in white-collar investigations and prosecutions over the last two years," said Michael Attanasio...
[Carole] Lam's tenure turned out to be glory days for the FBI's financial crime squads, for federal prosecutors working major frauds and for dream-team defense attorneys whose clients made headlines around the country.
When Karen Hewitt took over 22 months ago, controversy raged over what was perceived by some as politically motivated firings of Lam and seven other U.S. attorneys around the country...
Lam, a healthcare fraud specialist, had branded herself a champion of these high-impact corporate and public corruption cases. As for border crime, she bypassed the small players and went after leaders of large drug- and human-smuggling rings and corrupt border officials.
[Blogger's note: good call, Carole.]
...Criminal prosecutions in fiscal 2008, Hewitt's first full year in office, have increased 54 percent since Carol Lam's first year in office, fiscal 2003, according to the Transactional Records Access Clearinghouse, which monitors federal prosecution statistics. Comparing the same five-year period, immigration cases in the Southern District of California are up 88 percent.
[Blogger's note: The higher the prosecution rate, the more likely it is than innocent people are being charged. I'll bet the conviction rate has gone down for those who are brought to trial. I'll also bet that not many cases actually go to trial. If Hewitt charges everybody who gets scooped up by over-eager agents, then underpaid public defenders can't afford to defend them properly, and advise even their innocent clients to accept plea-bargains.]
Also during that span, prosecutions of white-collar cases referred by the San Diego FBI are down 74 percent, from 78 cases in 2003 to 18 cases in 2008, the lowest level in two decades. And public corruption cases are down 71 percent, from seven cases to two. Under Lam, the number of such cases had reached the highest levels in two decades, hitting 12 in 2004, TRAC found.
"She's very aware of the reasons her predecessor was axed," criminal defense attorney Bob Rose said of Hewitt. "I really doubt she would like that to happen to her."
...until a few weeks ago, the major frauds unit was at its lowest staffing levels in years -- a decline that began toward the end of Lam's 4.5-year tenure as resources dwindled. Four junior attorneys were assigned to the unit recently, bringing the number to about 11, lawyers in the office said. That appears to be in step with a national trend to crackdown on mortgage fraud and other financial crimes associated with the nation's economic meltdown.
Hewitt's office declined to provide statistics or answer questions, but said from 2007 to 2008, immigration cases were up 48 percent, gun cases were up 17 percent, child pornography cases were up 60 percent, and frauds were up 71 percent. Hewitt was interim U.S. attorney for eight months of fiscal 2007...
Former FBI chief Bill Gore, now the undersheriff, raved about Hewitt while introducing her as speaker at a Rotary Club meeting in October, calling her a "team player."
...the vast majority of cases prosecuted by Hewitt's troops comes from Customs and Border Protection (73 percent) and Immigration and Customs Enforcement (17 percent), both part of the Department of Homeland Security. Only about 2 percent of the U.S. attorney's cases are referrals for prosecution by the San Diego FBI, according to TRAC, which analyzes Justice Department data...
The federal government reported filing 151 criminal mortgage fraud prosecutions in the first 10 months of FY 2008, 10 of which are in the Southern District of California, which includes San Diego and Imperial counties, according to data obtained by TRAC.
The 151 federal mortgage fraud prosecutions so far reported for fiscal 2008 were clustered in only 10 judicial districts, with Florida South (Miami) the most active with 69 cases, followed by Western Pennsylvania (Pittsburgh) with 26 prosecutions. San Diego was tied for third with 10, sharing that distinction with Northern Georgia.
In its analysis of the data, the TRAC report said: "Given the broad troubles now confronting the economy of the United States, and the role that mortgage fraud may have played in these problems, the relatively small number of cases in this area is somewhat surprising. For example, during the same period U.S. attorney offices criminally prosecuted 554 individuals for simple drug possession, 399 cases for environmental wildlife protection and 405 for child pornography."
...Hewitt, a Republican and avid sports fan, joined the San Diego U.S. Attorney's Office in 2000 and prosecuted civil fraud cases before Lam appointed her as third in command -- executive assistant U.S. attorney -- in 2006...
With the election of Democrat Barack Obama to the White House, Hewitt almost certainly will be stepping down, and priorities are likely to shift again with the unnamed new appointee. The position is a political appointment, and incoming presidents typically choose their own U.S. attorneys. But that process could take up to a year.
[Blogger's note: Unfortunately, Democrats often let big fish get away, just like Republicans. I would like to see the appointment of Eliot Spitzer or someone with equal courage to go after the criminals in insurance companies. And I'd like to see the US Dept of Justice do something more important than going after prostitutes.]
Hewitt apparently prefers to put little guys in jail, burdening the taxpayers and contributing the United States reputation as having the highest percentage of incarcerated population in the world. It's not hard to get someone to plead guilty when their exhausted lawyer doesn't have time to work on the case. You end up with lots of guilty pleas, often from innocent people who fear more years in jail if they don't plead guilty.]
...the additional cases under Hewitt have had a significant impact on workload for the U.S. District Court, the clerk's office, court-appointed defense lawyers and the jails and prisons.
Federal Defenders of San Diego Inc. has been forced to increase the number of staff lawyers by 25 percent in the last year to handle the caseload. "There've been points in the year when everybody's been just absolutely under water," said Reuben C. Cahn, executive director. "Everyone can work 80 hours a week for a couple months at a time but they just can't do it longer than that without the quality of work eroding or without burning out. It's been a very difficult year for us."
Cahn said the numbers tell the story. His office handled 892 immigration cases in FY 2006, then 1,240 in 2007 when Hewitt first took over, and 1,660 in 2008. "That's essentially doubled in two years," he said.
So, the prominent white-collar defense lawyers are doing a lot of civil cases now. There have been no new high-profile corruption cases like Cunningham, who is serving more than eight years in prison.
An Office of the Inspector General report has concluded that Lam's firing, while mishandled, did not appear to be an effort by the Bush Administration to derail Lam's pursuit of Cunningham and spinoff cases targeting GOP colleagues. Her firing was about failing to prosecute border crimes, a Justice Department priority, the report said...
[Blogger's note: There's obviously no need for meddling. The Bush Administration hired Hewitt because they were confident she would do exactly what they wanted.]
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